Interest Coverage Ratio
A ratio used to determine how easily a company can pay interest on outstanding debt. The interest coverage ratio is calculated by dividing a company's earnings before interest and taxes (EBIT) of one period by the company's interest expenses of the same period:
Investopedia Says:
The lower the ratio, the more the company is burdened by debt expense. When a company's interest coverage ratio is 1.5 or lower, its ability to meet interest expenses may be questionable. An interest coverage ratio below 1 indicates the company is not generating sufficient revenues to satisfy interest expenses. Related Terms:
Cash Available For Debt Service - CADS
Compounding
Creditor
Earnings Before Interest & Tax - EBIT
EBITDA-To-Interest Coverage Ratio
Fixed Interest Rate
High-Yield Bond
Interest Expense
Interest Rate
Loan |